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Why Credit Unions Should Be Your Best Friend
What is a credit union?
A credit union is a cooperative, nonprofit, member-owned financial institution. Unlike banks, which are owned by shareholders and must distribute profits to their owners, credit unions are owned by their members, who are also their customers. More than 122 million Americans are members of credit unions.
Credit unions offer many of the same types of financial products and services as banks. Because a credit union’s customers are member-owners, the credit union pays “dividends” instead of “interest.”
If you choose to keep your money with a federally insured credit union, you will also benefit from the credit union equivalent of FDIC insurance: the National Credit Union Administration (NCUA) provides federal insurance on up to $250,000 of qualifying deposits per depositor, per insured credit union, for each account ownership category, in the event of a credit union failure.
The bottom line is that credit unions are intended to serve as a safe place for people to save and borrow at reasonable rates. Because of their nonprofit status and community-oriented mission, credit unions can sometimes offer significant differences from banks and provide some surprising benefits to their members.
– Forbes Advisor
13 Benefits of Credit Unions
Personalized customer service
Higher savings interest rates: “Credit unions tend to offer higher interest rates on savings and deposit accounts than banks do. Massachusetts-based Digital Credit Union, for instance, currently offers members an impressive annual yield of 6.7% on the first $1,000 in their primary savings account (Experian).”
Lower bank fees: Often, you receive zero-fee checking and savings accounts without a minimum balance requirement like traditional banks.
Lower interest rates: Credit unions offer the lowest rates on credit cards, personal loans, mortgages, and car loans.
Community focus: There is usually a prioritization to bettering the community in some capacity. Some credit unions offer grants and scholarships to students. Nearly 50% of credit unions serve low-income communities. Many people cannot afford all of the fees that traditional banks charge. Credit unions help their members save massive amounts of money through low bank and loan fees; there is also a significant opportunity to save more with the high savings interests rates. Credit unions generate an annual $4.9 billion of economic benefits (Forbes).
Support diversity and inclusion: “Credit unions have a strong focus on support for diversity and inclusion. Credit unions have more than 10 times as many women serving as CEOs compared to traditional banks. Credit unions are also more likely than banks to be Minority Depository Institutions (MDIs); more than three times as many credit union MDIs as bank MDIs. Many companies talk about how much they care about diversity and inclusion. Credit unions make it part of their everyday work by providing for the financial needs of diverse communities.” (Forbes)
Voting rights: When you are a credit union member, you are also part owner of a credit union.
Diverse financial offerings
Insured deposits: “Federal credit unions (and some state credit unions) are insured by the National Credit Union Administration via the National Credit Union Share Insurance Fund, whereas some credit unions, including many state-chartered credit unions, are privately insured. The NCUSIF is backed by the U.S. government and covers individual member deposits up to $250,000 at all federally insured credit unions. Remember that the U.S. government does not back privately insured credit unions. Before picking a credit union, you should identify how it’s insured.” (Credit Karma)
More forgiving qualification standards: I’ve known people who have poor credit scores get $25,000 credit limits. Credit unions will work with you if you have a damaged or poor credit history. Instead of giving an immediate “no,” they will usually find ways to work with you.
Personalized credit assistance: If your credit profile is not so sparkly, a credit union can help. “We have at least one certified credit counselor who can sit down with people,” says Stephen Lark at Communication Federal Credit Union. “We give members a credit score for free and then walk them through the numbers. We look at their entire picture and explain how to increase their scores, get out of debt, discuss their best products and services, and cover their long-term goals and short-term issues.”
Education: Credit unions often provide financial education to members and non-members. I have read many credit union blogs that offer exceptional personal finance intel. Many credit unions offer free workshops, seminars, videos, blogs, and tax planning.
Credit for small business owners: It’s not the easiest task to get a business loan or even a bank account. Credit unions are more accepting of new business owners that traditional banks would otherwise decline.
Credit Unions Can Provide Better Benefits Because…
“[…] they don’t have to pay profits to shareholders as banks do, credit unions often can pass that money on to their members, by offering higher APYs on savings accounts and CDs and lower APRs on loans.
Credit unions offer some of the best checking accounts, high-yield savings accounts, and CD rates.” (Forbes)
Credit Unions Provide Better Customer Service Because…
Their customers are the shareholders. If you ever talk on the phone to a customer service rep at a credit union and then chat on the phone with a traditional bank, you will experience a noticeable difference in customer service.
“These institutions tend to be highly focused on providing customer service in a way that not every bank may be inclined or able to match.” (Forbes)
All in all, credit unions provide excellent benefits that can’t be ignored – especially for those still building their financial profiles and history.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.